Jul 01 2022
Moving clients to asset allocation
By Bruce Peng, Sean Yu
When an advisor in the Taiwan Area presents wealthy clients and prospects with the notion of asset allocation by using life insurance as one of the investment tools, they usually scoff and pepper the advisor with questions: What was the internal rate of return? Why buy a product with low return when I could mix my investments in more lucrative categories like stocks, mutual funds, real estate and precious metals?
“They didn’t understand the role of insurance and had little interest in the benefits or protecting themselves through asset allocation when other investments were performing better,” said Fan Pei Hsiao, a three-year MDRT member from Taipei, Taiwan Area.
That response was typical before the pandemic. However, as the coronavirus ensued, clients gradually realized that life is fleeting, and their investment attitudes turned more conservative. Now they were asking how to transfer assets to beneficiaries as well as other issues related to estate planning. This changing sentiment marks the beginning of what Hsiao believes can become the best time for marketing insurance services “because clients have shifted from passively accepting insurance to actively seeking insurance for hedging and for the opportunity to take care of their beneficiaries.”
The most important thing is to detect your clients’ needs and provide appropriate solutions.
But clients still had misgivings about the role and performance of insurance, particularly as a hedge against risk, compared with other investments. So, to explain the attributes of one over the other, she used common household items in metaphors. For example, she compared tissue paper with kitchen paper towels. Both are similar in material but have different purposes. Tissue is fragile and tears apart when used to wipe up a cooking oil spill, just like an investment in a commodity, for example, could falter in the face of risk. However, a kitchen paper towel is stronger and stays intact to wipe up that spill, much like the way insurance will be there for the client and their family when confronted with risk.
Hsiao also provides examples, or vignettes, using subjects matching the client’s background and age — in one case, an older client who is the father of four young children — to illustrate the consequences of ignoring risk planning and the benefits of protecting assets to pass on to their family. Being specific about the potential risks clients could face in the future will enhance the importance of including insurance in their portfolios.
However, to seize this opportunity and stand out, advisors need to learn about all of the clients’ assets to establish a sound asset allocation plan. That task is difficult because upscale clients in her market resist disclosing their full financial picture to advisors who are not their relatives. So, Hsiao advises colleagues to equip themselves with professional skills like tax law expertise, tax filing services and other specialties and earn the confidence of clients by offering solutions to their problems. Hsiao’s clients know that she completed tax preparer classes and earned an AFP certification. She even volunteered to review an income tax return prepared by an accountant for a client. Because her help resulted in saving that person money, their relationship is stronger now.
“Take a comprehensive look at the overall situation and gain the trust of clients,” Hsiao said. “The most important key is that you must continue to improve yourself, create your own value. By taking the initiative to solve their problems, we can relieve the clients’ defenses, allowing us to better understand their financial situation.”
Hsiao added, “In fact, no matter before or after the pandemic, whether the financial or personal situation is comfortable or turbulent, as an insurance and financial advisor, the most important thing is to detect your clients’ needs and provide appropriate solutions, which will differ from client to client.”